Distributive & Integrative Negotiations

What is a distributive negotiation?

A “distributive negotiation” is a situation in which interests or objectives of the parties are the same and are mutually exclusive. These situations are characterized by a finite or fixed amount of resources. The interest(s) or objective(s) of the other party are in direct conflict with yours. In plain language, the parties seek to claim the same value; thus, any value that one party receives means the other party receives less value in the negotiation. For example, if the parties are competing for a share of the same pie, one party acquiring a greater percentage of the pie means the other party gets less pie. This is often the case in single negotiations (single deals or transactions) at the stage of negotiation where the negotiator can effectively improve her position or gain value. The distributive negotiation is generally very competitive (a win-lose situation) and does not foster cooperative behavior. A distributive negotiation strategy seeks to grab as much possible in that negotiation.

• Note, that a distributive negotiation strategy may still be ineffective in a distributive negotiation when there will be an on-going business relationship. Such a strategy can create animosity between the parties, negative emotions, and cause damage to the party’s reputation. These harsh effects may be mitigated in negotiations when parties wish to cooperate or avoid competitive behavior in the distributive negotiation.

2. What procedures are considered best practices in a distributive negotiation?

As previously discussed, a distributive negotiation is generally competitive in nature. One party gains in a negotiation at the expense of the other party. Distributive negotiations can, nonetheless, be successful when there is a positive zone of potential agreement (ZOPA). Generally, issues threatening the success of a distributive negotiations arise because of how the pie is sliced. Below is a proposed approach for dealing with a distributive bargaining situation.

• Step 1: Determine the interest or benefit at stake.

• Step 2: Assess your BATNA (and seek to improve it).

• Step 3: Determine your reservation point (do not reveal it).

• Step 4: Research the counterparty’s BATNA and estimate her reservation point.

• Step 5: Determine your target point (be realistic, but optimistic).

• Step 6: Assess your strategic position and objectives. In a separate section, we discuss developing a strategic plain. The process begins with setting a strategic orientation (cooperative, competitive, aggressive, deliberate, etc.) You must also assess your strategic objectives (such as building trust, establishing a relationship, appealing to logic, etc.). Finally, you will develop a plan for achieving your objectives in a way consistent with your strategic orientation. This will include general efforts you will undertake and the tactics you will employ.

• Step 7: Set your Anchor. If you have a strong understanding of the interests and position of the other party, make the first offer. If you are clueless about the other side’s position, you may need to let the other party open. Just remember, your first offer represents the most important anchor point – so anchor high (but maintain reason). If the other party makes the first offer that is outside of your best understanding of the ZOPA, you will need to immediately re-anchor above your target point.

⁃ Note: Avoid the winner’s curse, situation in which a negotiator makes an offer that is immediately accepted by the opponent, thus signaling the fact that the negotiator offered too much. Avoid boulwarism, a bargaining style in which one’s first offer is one’s final offer.

• Step 8: Plan your concessions. Based upon your perception of the situation and the other party, develop a plan for how you will approach concessions. You may follow a pattern. For example, you could plan to make multiple small concessions followed by a large concession to signal a “bottom line” or final negotiation point. Any plan should concern the extent of concession (small or large) and the frequency or timing.

• Step 9: Make a final offers. The final offer should express to the other side that there is no further room for negotiation. As previously noted, a major concession following multiple smaller concessions can signal a final offer without expressing it. In some instances, you may want to simply state that this is your final offer. If the counterparty’s final offer is not acceptable, try to shift focus and appear not to recognize it.

⁃ Note: Do not fall for the “let’s split the difference” ploy, unless it benefits you. Early in the negotiation, this is generally a bad idea. One party inevitably leaves value on the table. This tactic can, however, be useful if the parties reach an impasse in final offers.

What is an integrative negotiation?

An“Integrative negotiation” involves a scenario where the interests or objectives of each negotiator is not mutually exclusive. These negotiations contain more than one interest or objective. Often, the interests may be complex and only similar in certain aspects. As such, the resources claimed or the source of conflict between the parties are not singular or finite and there is opportunity for both parties to simultaneously improve or further their positions. As such, these negotiations are often referred to as “win-win” negotiations. Improvement of one’s position does not come at the expense of the counterparty improving her position – so both parties can win. This is in stark contrast to a distributive negotiation in which the resources or finite or the interests or objectives of the parties are at odds.

An integrative negotiation allows the negotiators to be creative in the negotiation process and create new or additional value for both parties. The breadth of interests allows for unique combinations, which allow the parties to isolate unique value and optimize concessions in the negotiation. Another way of creating value is by undertaking secondary or side negotiations that are separate from but dependent upon the primary negotiation. In any event, value can be created by combining different value propositions in a way that allows a negotiator to alter or affect the other party’s interest preference or objectives. In theory, an integrative negotiation allows for an optimal outcome for all parties without leaving any potential value on the table (unclaimed). In some cases, a negotiation may begin as distributive, but it becomes integrative as the parties are able to introduce alternative issues. It is important to note, however, that an integrative negotiation does NOT necessarily mean that there will be a compromise or furtherance of a relationship between the parties. It simply means additional value is created for both parties without it coming at the expense of the other party.

• Note: A perfectly executed integrative negotiation results in a “Pareto efficiency”. This results when there would be “no agreement that would make any party better off without decreasing the outcomes to any other party.”

What procedures are considered best practices in a integrative negotiation?

Begin by understanding the primary approach to a distributive negotiation. As part of any negotiation procedure, you must assess your interests and strategy. Below, we outline unique or additional components to the process to make the negotiation integrative in nature.

• Step 1: Identify and define the interests in conflict. As in a distributive negotiation, the first step is to focus on the interests at stake. In an integrative negotiation, there are generally multiple interests. Thus, it is important to evaluate and prioritize the interests at stake. This is a critical step because it sets broad parameters regarding what the negotiation and provides an initial framework for dealing with the conflict.

⁃ Note: There is almost always more than one type of interest underlying a negotiation. Types of interests might include: Substantive Interests; Process-based Interests; Relationship-based Interests; and Interests in Principle

• Step 2: Assess your BATNA with regard to the alternative interests. Evaluating and selecting alternative courses of action is again part of the strategic planning process. As examples of what we will discuss in Chapters 5 & 6, below are some approaches to evaluating strategic options. Be able to justify you preferences for one alternative over another. You may want to address issues of risk preference, expectations and logistics (such as time preferences).

• Step 3: Determine your reservation point, but do not reveal it. There may be a reservation point for every interest at stake.

• Step 4: Determine your target point (be realistic, but optimistic).

• Step 5: Research the counterparty’s BATNA and estimate her reservation point. This is very difficult when there are multiple interests at stake. If, however, there is one outstanding interest for a competitor, this is extremely useful information.

• Step 6: Assess your strategic position and objectives. In a separate article, we discuss what makes up a strategy – namely the orientation, objectives, and plan. With an understanding of the other party, you can pursue a competitive, collaborative, yielding, compromising, or avoidance strategy. Your objectives will concern how you will seek to approach each interest. For example, will you use logic or emotion to seek commonality of understanding, or will you attempt to deceive the other party? Then you can begin forming a plan for how you will carry this out. The plan is generally fully of tactics for carrying out your strategic objectives in accordance with your orientation.

• Step 7: Set your Anchor. Generally, you will open up with a packaged or bundled offer of the interests at stake. To give room for concessions, it is still advisable to aspire high on all available interests. Unlike in a distributive negotiation, however, it may be possible to increase your request for any single interest if you are wiling to reduce your request for another.

• Step 8: Plan your concessions. Based upon your perception of the situation and the other party, develop a plan for how you will approach concessions. You may follow a pattern. For example, you could plan to make multiple small concessions followed by a large concession to signal a “bottom line” or final negotiation point. Any plan should concern the extent of concession (small or large) and the frequency or timing.

• Step 9: Make a final offers. This can be difficult when there are multiple interests at play. A final offer in such situation should NOT really be a final offer, unless you specify a reservation point for any given interest.

Of course, there are any number of ways to approach an integrative negotiation. This proposed approach simply seeks to identify a logic and cohesive approach to dealing with an otherwise difficult scenario.

What personal characteristics of negotiators facilitate a successful integrative negotiation?

An integrative negotiation is unique in that it involves more complex interest and, thus, requires a more complex strategy. The following are characteristics of orientations of a negotiator that tend to improve their proficiency in integrative negotiations.

• Common, Shared, & Joint Objectives or Goals. Negotiators should seek commonality in goals or objectives with regard to any interest. A common goal is one that all parties share equally, each one benefiting in a way that would not be possible if they did not work together. In the absence of a common goal, the parties may be able to identify shared goals for any interest. A shared goal is one that both parties work toward but that benefits each party differently. If a specific interest goal is not common or shared, it may be possible to combine the the interest with others in support of a greater ultimate goal or objective. A joint goal is one that involves different personal goals agreeing to combine them in a collective effort.

• Confidence in Problem-solving Ability – Parties who believe they can work together are more likely to do so. Confidence is related closed to perceived ability or knowledge. I high level of skill of knowledge is known as expertise. Expertise with regard to an interest at stake in a negotiation strengthens the negotiator’s understanding of the problem’s complexity, nuances, and possible solutions. Expertise, if approached correctly, will generally lead a negotiator to be more open minded and creative regarding potential resolutions or possible outcomes.

• Openness to alternative perspectives – Integrative negotiation requires a negotiator to accept both her own and the other party’s attitudes, interests, and desires as valid. Empathy is the ability to understand the position of other party. This is important for successfully employing a cooperative strategy in an integrative negotiation.

• Motivation and Commitment to Work Together – For integrative negotiation to succeed, the parties must generally be motivated to collaborate. Collaboration entails a cooperative approach to resolving the conflict at hand. This generally requires a belief in a common fate or understanding of the level of dependence in the negotiation.

• Trust – Mistrust inhibits collaboration. Generating trust is a complex, uncertain process. In a separate article, we discuss in detail the role of trust and relationships in negotiation.

• Clear and Accurate Communication – Negotiation is essentially a communication exercise. Of note, negotiators must be willing to selectively share information about themselves as part of the negotiation process. Further, negotiators must understand the communication, or meaning each party attaches to their statements. In Ch. 9 of this material, we discuss the significance of communication in negotiation.